23 Dec Locking bias
Mortgage bonds are continuing to hang in the fight, with today’s trading virtually flat. Although at a very slow rate, bonds have formed a small upward channel that is showing signs of having the strength to make a break out of the steep downward channel that has pushed mortgage rates higher the past month and a half. If this in fact happens, we could see bonds experience a nice recovery rally shortly after making the break. We will know if this is the case at some point next week.
Many traders are vacationing today, so trading will certainly be light. That increases the chance of wider swings as the volume has little counter action as investors make trades. Bond markets close at noon MST today, and will remain closed until next Tuesday. Next week will also bring light trading, so it could also bring an increase to overall volatility.
News today is light. Based on this morning’s trading, we will likely see minimal movements as the day wears on. Therefore, we will maintain our locking bias.